Correlation Between Ping An and China Mobile

Can any of the company-specific risk be diversified away by investing in both Ping An and China Mobile at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ping An and China Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and China Life Insurance, you can compare the effects of market volatilities on Ping An and China Mobile and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ping An with a short position of China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and China Mobile.

Diversification Opportunities for Ping An and China Mobile

0.87

Correlation Coefficient

Ping An  China Mobile

Very poor diversification

The 3 months correlation between Ping and China is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and Ping An is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ping An Insurance are associated (or correlated) with China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Ping An i.e., Ping An and China Mobile go up and down completely randomly.

Pair Corralation between Ping An and China Mobile

Assuming the 90 days horizon Ping An is expected to generate 1.23 times less return on investment than China Mobile. In addition to that, Ping An is 1.22 times more volatile than China Life Insurance. It trades about 0.08 of its total potential returns per unit of risk. China Life Insurance is currently generating about 0.12 per unit of volatility. If you would invest  173.00  in China Life Insurance on December 4, 2024 and sell it today you would earn a total of  10.00  from holding China Life Insurance or generate 5.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Ping An Insurance  vs.  China Life Insurance

Ping An Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ping An is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Mobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ping An and China Mobile

The main advantage of trading using opposite Ping An and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An position performs unexpectedly, China Mobile can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Mobile will offset losses from the drop in China Mobile's long position.

The idea behind Ping An Insurance and China Life Insurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.